Unlock Working Capital

Businesses can squeeze working capital from optimized payments, billing

Peter Kenter

Businesses looking to unlock working capital often overlook a source hidden in plain sight: sub-optimal cash flow trapped by an inefficient billing and payment system.

“Businesses ranging from start-ups to global multinationals are all looking for incremental sources of working capital,” says Paul Roman, vice-president and general manager of global commercial payments at American Express.

“Even if you’re a well-financed business, there are seasonal shifts or unexpected opportunities where you’re looking for that additional working capital. But accessing that capital from traditional lending sources may be more costly than finding that capital inside your own cash flow. We span across 100,000 customers in most verticals and we see many businesses that want to either extend their days payable outstanding or accelerate their days sales outstanding.”

American Express helps businesses do just that through such solutions as Buyer Initiated Payments. The platform empowers buyers to upload approved invoices with instructions on when to pay the supplier. American Express settles with the provider sooner, while the buyer settles with American Express later, reserving working capital for the duration.

“By accelerating payments, you can also often negotiate a better deal with suppliers, whether it’s an office supplies company or one selling construction material,” says Roman.

Ensuring these solutions work for both buyers and sellers requires more than simple transaction efficiency. American Express has developed significant expertise in specific business categories to advise companies whether such solutions will work successfully to maximize working capital.

“We’re inundated with requests from merchants who are customers of ours, asking us to help them accelerate their receivables with buyers who may already be using Amex in another capacity,” says Roman. “They even ask us to acquire buyers, putting us on the receivables side on their behalf. We work in the middle to drive efficiency and generate working capital on both the buy and supply side.”

American Express also leverages its expertise by helping businesses to analyze the payables and receivables in their cash flow.

“We can apply a wealth of analytics to their situation at no cost to them,” says Roman. “We explain to CFOs, for example, that, based on our experience with 100 companies just like theirs with a similar vendor base, here are all of the industry-friendly verticals and parties who are typically willing to accept an accelerated payment, whether on a card or through an electronic funds transfer (EFT).”

Amex is quick to identify only those transactions where these solutions unlock working capital. The result is a customized solution that applies to certain types of businesses or to specific suppliers. Amex also works to minimize technological barriers that might impede the efficiency of such transactions.

“We help to identify the lowest-hanging fruit that provides the greatest efficiency and the quickest access to working capital,” says Roman. “You’ll know who to approach first. The last thing anyone wants to do is bring on a vendor and find that it takes a lot of work to realize those benefits.”

He notes that these solutions are both scalable and negotiable. Smaller or mid-sized businesses might find that a card-type product provides the most effective approach.

“However, there’s a difference between buying an order of laptops from a company and buying a server system costing seven figures,” he says. “At those higher numbers we begin to utilize EFTs and the costs are customized to a level appropriate to the transaction and can be very competitive. However, the premise of leveraging payables or accelerating receivables remains the same.”

Amex can also facilitate cross-border payments or allow buyers and sellers to settle in U.S. dollars or any requested currency.

For businesses who still rely primarily on cheque transactions, Roman often encourages them to leverage a segment of their payables and then compare the results to the remaining cheque-based transactions.

“After testing and analyzing, they generally see the light quickly,” he says. “Their legacy cheques don’t last long.”

Roman notes that optimizing cash flow has been driving a disproportionate amount of Amex business growth in Canada.

“Even for many companies with a sophisticated working capital plan they’ve found that the plan is not as robust as they thought it was,” he says. “Sometimes we’re approached simply because the working capital we can help release is tagged up against a specific project that’s already on the schedule.”

Additional Resources

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